ao link

Bromford and NatWest sign debut SLL based on energy-efficient homes

News10 Feb 2020Sarah Williams

Bromford has agreed its first sustainability-linked loan (SLL) with NatWest, also marking the lender’s first social housing transaction to adopt the model, and the sector’s only SLL to be linked to environmental targets so far.

Linked InXFacebookeCard
Picture: Getty
Picture: Getty
Sharelines
Housing association @Bromford and @NatWestComm sign debut sustainability-linked loan, with targets based on energy-efficient homes #ESG #ukhousing #socialhousingfinance
NatWest and @Bromford sign social housing’s first sustainability-linked loan to be tied to environmental metrics #ESG #ukhousing #socialhousingfinance

The interest rate on the £50m revolving credit facility (RCF) is linked to metrics concerning the energy efficiency of Bromford’s existing homes, meaning that the 43,000-home provider will pay a lower margin if it meets pre-agreed targets.

 

The deal is the first debt facility for the West Midlands and South West-based provider to carry an environmental, social and governance (ESG) wrapper, and the 10-year term makes it its longest RCF.

 

News of the deal comes shortly after Social Housing reported that SLLs – which entered the sector in 2018 – were set to exceed £0.5bn as more lenders prepared to adopt the model.

 

NatWest’s entry into the field makes it the fourth lender in UK social housing to have completed an SLL, following BNP Paribas, First Abu Dhabi Bank, and most recently Japanese bank Sumitomo Mitsui Banking Corporation (SMBC). With the addition of Bromford’s £50m, agreed SLL facilities across five housing associations now total £525m.

 

Bromford and NatWest’s deal is the first of these to focus performance metrics on environmental targets.

 

Previous loans have seen margin linked to social impact indicators. For example Clarion’s two £100m RCFs with BNP Paribas and SMBC, signed in December, both have a margin tied to the group supporting an agreed number of people into work each year.

 

Optivo and L&Q have also previously agreed loans with an interest rate linked to employment metrics, while a £75m deal between Peabody and BNP Paribas was linked to the association delivering an agreed number of accredited childcare qualifications under its childcare training programme.

 

Meanwhile, Clarion launched the sector’s first capital markets issue to carry a ‘sustainable’ label, with its £350m on 15 January.

Read more

Bromford locks in current rates through £100m deferred placement with Legal & GeneralBromford locks in current rates through £100m deferred placement with Legal & General
Bromford raises £90m to refinance legacy loan as it ‘proactively optimises’ bookBromford raises £90m to refinance legacy loan as it ‘proactively optimises’ book
Clarion continues ESG drive with £200m sustainability-linked loans with new lendersClarion continues ESG drive with £200m sustainability-linked loans with new lenders
DGHP agrees £149m funding package as it completes partnership with WheatleyDGHP agrees £149m funding package as it completes partnership with Wheatley
European investors boost record low rate on HA’s £350m sustainable bondEuropean investors boost record low rate on HA’s £350m sustainable bond

Imran Mubeen, head of treasury at Bromford, said: “Our latest business strategy sets out our aim to improve the energy efficiency of our homes. We aim to reduce our impact on the environment and combat the effects of fuel poverty, putting more money back into the pockets of our customers.

 

“We’ve also proactively sought to bring in new funding at sector-leading rates to optimise our loan book. We are delighted to bring these two aspirations together on our latest funding deal.”

 

Mr Mubeen said that establishing the loan on the “most competitive terms without dilution for the ESG link” was an important factor in agreeing the deal.

 

The funding replaces an existing £45m term loan with NatWest that was due to expire in 2021. Mr Mubeen said that the new 10-year RCF provides greater flexibility, complementing Bromford’s bond issuances, as it works towards delivering 13,000 homes by 2028.

 

Commenting on the deal, Hedley Hadfield, director of housing finance – commercial banking at NatWest, said: “As one of the key social housing providers we provide funding to, we are delighted to retain and build upon our existing relationship with Bromford.

 

“This is our first ESG-linked loan to the housing sector – it’s a growing market for us and we’re thrilled to assist Bromford and other providers in meeting their sustainability targets.”

 

Further deals are expected to follow, after Stuart Heslop, managing director of real estate finance at NatWest, told Social Housing that the bank was “in legals” on three SLLs to housing associations.

Mr Mubeen said that social housing providers have a “tremendous story to tell” on ESG themes including homelessness, the environment and community regeneration, but he added that there is a challenge around “bringing these themes together in a coherent framework and capturing high-quality data to support specific targets attached to loans”.

 

Bromford said that it already reports on the energy efficiency metrics used for its new loan, but that these will now be included in its annual group accounts and will be independently audited. The ratchet applies from 1 April every year and is based on the performance in the preceding financial year.

 

Bromford has committed to reinvesting the savings it makes on the loan margin into its community projects including its YouCan Foundation, which awards grants to customers and local initiatives.

 

The deal follows a year in which the group has sought to “proactively optimise” its loan book, completing more than £1bn in new finance and refinancing older facilities combined. This included raising £90m in two concurrent transactions in December, one private and one public, to refinance a legacy loan.

 

Last month the provider had its A+ credit rating reaffirmed by Standard & Poor’s, with the agency citing “very strong liquidity, exceptional asset quality, and strong debt sustainability metrics”.

 

Mr Mubeen said that the provider “[looks] forward to issuing more ESG-linked debt in the near future”.

 

Bromford’s legal advisor on the deal was Trowers & Hamlins. Funders’ valuation was from JLL, and NatWest’s advisor was Addleshaw Goddard.

ESG/impact investmentFinanceHousing Association/RPRegulation and GovernanceSouth WestWest Midlands
Linked InXFacebookeCard
Add New Comment
You must be logged in to comment.

RELATED